Family businesses can experience challenges when implementing good corporate governance. At Grant Thornton we help families put in place governance policies and procedures which address business risk and professionalise the way a business makes decisions. But research from Canada suggests that despite these challenges, family firms don't suffer from the short-termism which afflicts many public enterprises; and that in Canada, family firms outperformed the local stock market index by a staggering 40% over the past 20 years.
Controlled corporations, especially those that are family controlled, form the bulk of this lower class and are usually dismissed in conversations about good governance. When was the last time a board was complimented for having fewer independent members, or a company was praised for its dual class share structure?To many savvy investors, however, today’s most treacherous governance risk doesn’t manifest as a boardroom policy or practice, but as a larger corporate philosophy: short-term perspective. They worry that an obsession with quarterly results drives managers and boards to myopic decision making at the expense of future success. But family controlled companies may represent a unique antidote to short-termism. Inherently concerned about the wealth of future generations, family firms ought to be resistant to the allure of quick gains.